UK house prices hit record level, says ONS

UK house prices have risen to a record level, according to the Office for National Statistics (ONS).

In August, the ONS's house price index stood at 185.8, surpassing its previous peak of 185.5 in January 2008.

The average price of a house or flat in the UK is now £247,000, the ONS said, the highest figure since the index was first calculated in 1968.

The figures suggest house prices are rising in England, Wales and Northern Ireland, but still falling in Scotland.

Analysis

By Hugh PymChief economics correspondent, BBC News

The latest figures will fuel the debate on whether a house price bubble is developing. UK prices are now above their previous peak in January 2008, according to the ONS.

But once again big variations around the UK have been revealed. London price rises in the year to August, at 8.7%, were more than double the next biggest increase of 3.8% in the East Midlands.

Both were well ahead of increases of around 1% in Wales and Northern Ireland and a fall in Scotland.

There is clearly not a UK-wide boom, but the fact that first-time buyers are paying nearly 5% more on average will give ammunition to those who feel affordability is the key issue, rather than mortgage availability, which is the focus of the chancellor's new Help to Buy initiative.

Prices across the UK rose by 3.8% in the year to August 2013, up from 3.3% in July. However, excluding London and the South East - where property values have seen the biggest increases - prices rose by just 2.1%.

Calculations

Other measures, including surveys from the Halifax and Nationwide, indicate that house prices are still well below record levels.

Earlier this month, the Halifax reported that the average price of a house was £170,733, nearly £30,000 short of the peak seen in July 2007.

The difference in average prices is due to the different methodology used by the ONS.

The ONS index is calculated on actual transaction prices, whereas the Halifax and Nationwide use mortgage approvals.

The ONS figures are also higher because expensive properties in London get a larger weighting in their calculations.

The number of transactions is also well below that seen at the height of the housing boom.

Bubble?

The news may add to concerns that the UK could be facing a house price "bubble", although many feel that these fears have been overplayed.

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Howard Archer, the chief UK economist of IHS Global Insight, said: "We are a long way off from an overall housing market bubble emerging."

However, he also warned that the government's Help to Buy scheme could inflate prices significantly.

The scheme, already underway, allows homebuyers to put down a deposit of just 5%.

If a buyer defaults on a mortgage, lenders will be able to reclaim some of the money from the government.

"There is a significant risk that house prices could really take off over the coming months, especially if already appreciably improving housing market activity and rising buyer interest is lifted markedly further by Help to Buy," he said.

On Monday, the new deputy governor of the Bank of England, Sir Jon Cunliffe, told MPs that it "doesn't look that we are in a bubble".

However, he added that there was a possibility the Help to Buy scheme could cause problems for households.

"In terms of whether it leads to households becoming overexposed, because they can borrow higher amounts, there is is a possibility it could do that, and that would create more of a risk," he told members of the Treasury Committee.

A report from the housing charity Shelter is calling for house prices to be stabilised.

It says that otherwise most people in their 20s will stand less than a 50% chance of ever owning a property to live in.